West Africa's developing potential driving Vanco's E&P expansion

Oct. 1, 2001
Betting on 5 billion barrels

US independent producer Vanco moved into international waters in 1973 and settled on the firm's latest project - offshore West Africa - in 1996. When the North Sea reached a level of maturity that failed to fan the sense of adventure of Gene Van Dyke, the firm's president and CEO, he looked elsewhere for exploration opportunities.

"I came to the conclusion a long time ago that if you want to build a company, you couldn't do it on the onshore US," he said. The major fields he hoped to find weren't lurking beneath the waters of the North Sea or North Atlantic.

Van Dyke first considered the world's deepwater areas. "I'm a fan of deepwater. I think the future of the offshore oil business is in deepwater, basically deeper than 1,100 ft. The continental shelves of the world are pretty mature, but the deepwater areas are immature. Though we have been able to shoot seismic in deepwater for some time, it was only in the last five or six years that we have actually been able to drill, complete, and produce in deepwater," he said.

Into Africa

So, why Africa? "The stage of exploration in deepwater West Africa in 1996 was far behind the Gulf of Mexico and Brazil. In those areas, operators were drilling deepwater wells and making discoveries, but that hadn't caught on yet in West Africa," Van Dyke said. So Vanco began gathering geological data to determine the attractiveness of investing in offshore acreage there.

Vanco studied a number of countries in West Africa, initially focusing on Gabon, where the company identified two blocks, the second in water as deep as 10,000 ft. The two blocks, adjacent to the Congo boundary, were open and available and had only partially been seismically surveyed.

According to Vanco, the geology on those blocks was the same as that further south, off Angola, where there had been major discoveries. "No one had done anything with these blocks because they're in deepwater, and companies in Africa had not gotten around to deepwater. We obtained a lease on both of them in early 1997," Van Dyke explained. The Anton Marin and Astrid Marin total 3.3 million acres.

Vanco shot 2D seismic over the blocks and later commissioned about 4,000 sq km of 3D seismic. At that point, the blocks raised significant interest. "All these companies (some operating there) were trying to make a deal with me," Van Dyke said. "We opened up a data room in Houston and had in effect a competitive lease sale among the large companies. As a result of that, we made a deal with Total primarily, and brought in Unocal, Kerr-McGee, and Reading & Bates. Total was the operator. The deal allowed Vanco to retain 22% interest and also involved considerable money."

That allowed Vanco to finance exploration into other areas, including Morocco, Senegal, Côte d'Ivoire, Equatorial Guinea, Namibia, and Madagascar. Vanco now has nine licenses and operates on seven. The firm holds 22 million net acres, at least twice as much as any other producer offshore West Africa.

All of the acreage is in deepwater, out to 10,000 ft. With the conclusion of a $30 million 3D seismic program this summer, the vast majority (7,970 sq km) will have been evaluated for prospectivity. "With the 2D seismic, we know we have major structures. The 3D seismic better defines them," Van Dyke said.

Developing acreage

Van Dyke believes that much of the acreage has tremendous potential. In Equatorial Guinea, for example, Vanco has one block comprising 1.1 million acres immediately south of Triton's Ceiba field. "Our block is equally as good as theirs. And that is only one of them," Van Dyke said.

Vanco operates in every block except Gabon, and Van Dyke said, "We're going to remain the operator, even after we bring in partners."

In the meantime, Vanco is setting up offices in Morocco, Senegal, Còte d'Ivoire, Equatorial Guinea, Namibia, and Madagascar and employing country managers to work with local government to facilitate development. When the company reaches the drilling stage, there will be a need for a considerably larger staff. Since drilling is scheduled to commence in 2003, Vanco is laying a foundation for the expected growth.

People equation

Van Dyke predicts Vanco will grow from 50 employees to 400 in short order. "It might be 300, or it might be 3,000, but 400 is a reasonable number." When the projects Vanco plans for offshore West Africa get underway, the need for people will be very real. That growth, Van Dyke suggests, could represent a "controlled explosion."

Vanco's desire to expand could be impaired by the oil industry's lack of qualified people. While Vanco is actively expanding office space in Houston, the staff will have to come from somewhere. Part of Vanco's expansion plans depend upon capitalizing on mergers and downsizing activity taking place among other producers. Van Dyke explains: "As soon as we hear that a company has either sold or is going to sell, we go after the key people. So, we're able to get very top-notch people because of the downsizing."

Van Dyke's plan for locating the best people is simple: "My philosophy is that you hire a person to do a job who has done the same job elsewhere," Van Dyke said. "There's no reason to gamble. There's no reason to experiment. There's no reason to have to train someone on the job. There are people out there."

Vanco is also looking out for its future manpower by investing in training programs that will bring nationals from countries where the company plans to develop projects to the US for schooling. As a start, Vanco has developed a training program with the University of Oklahoma.

In countries such as Equatorial Guinea, where there is a scarcity of trained people, Vanco will provide 2-year or 4-year scholarship packages to place degreed people in the area. After that, it's a matter of allowing them to acquire experience.

What of countries where there are no people available for training? "Generally, we will train people in the country or hire expatriates," he said. "What you have to do is start out with expats, then train local people, then pull the expats out and turn the operation over to local personnel."

Initially, Vanco plans a minimum setup for drilling exploration wells in each country. When there is a discovery, a development staff will exploit the fields. "The overall job is terrifically big, but you have to cut it down into bite-sized segments," Van Dyke said. The current objective is to provide for the foreseen eventualities and to lay plans to address potential personnel issues.

Managing growth

At present, Vanco has a Houston-based staff of 50. Van Dyke's management strategy involves holding daily, weekly, and monthly meetings to keep employees in touch with progress and setbacks. "My basic philosophy is to be very open and to let everyone know what's going on, and not to categorize people by department. When we're working on a big deal, we just get everybody together and talk," Van Dyke said.

"If you get esprit de corps by letting everybody become involved and making sure everyone is informed, you encourage loyalty. Everyone can talk to me and get news straight from me, rather than getting it third hand. Whether it's good or bad, I like to lay it out there.

"As we grow, it is going to be more difficult to do that, and I don't think we know yet really how we're going to do it," he said. "But we're going to do everything we can to keep a small company atmosphere."

With a large part of the projected growth outside the US, achieving this goal will present significant challenges, and Van Dyke is not deluded about the potential difficulties.

Creative financing

With the volatility of the energy industry, financing growth of this magnitude could present difficulties. Van Dyke believes any obstacles of this nature are inconsequential. "I don't have a problem (with financing). Other companies are driven by quarterly profits. When the price of oil drops, they let people go, and it's very short sighted. But they have to do that. Letting people go goes straight to the bottom line on the profits.

"We're private. We don't have to do that. We can look at the long term." Van Dyke said there are no plans for the company to go public.

Vanco's organization also works in the company's favor, he said. "Vanco has a New Ventures Department whose sole responsibility is to get us into new deals. They research a company, research the area, find out the seismic, and negotiate the new deals. Then, when the new deal is acquired, it's turned over to the Exploration and Operations Department."

Other companies don't operate that way, he explained. "They get so caught up in taking care of the acreage they have that they don't go out after new deals. They're so busy with the blocks they already have, they don't have much time for acquiring new deals."

"Any time you have an exclusive inventory - which we have - and everybody wants to get in on it - which they do - you have to take that and put it into practical value," he said.

"We're going to raise the needed money by bringing in a limited number of oil companies as partners," he said.

"We're going to have some major discoveries, and we're going to keep a large part of the working interest. Five years from now, I bet we will have in excess of 5 billion bbl, net to our interest. With the exception of Nigeria and Angola, we've got the best blocks offshore West Africa. And we know what we have. We've shot it, and we're going to get some major discoveries. We'll be producing this 30-40 years from now," he said.

The major discoveries Van Dyke expects are something he has worked for all of his professional life. "We've got the position, and we're going to expand rapidly. It's now a matter of keeping our eye on the ball. We're on the 80 yard line, and we're sure as hell not going to drop the ball now," he said.